UK: Commercial Court Finds Ship Off-Hire Whilst Held By Pirates

The Commercial Court has considered a further case on whether a
ship was off-hire whilst held by pirates.

The background facts

The owners and the charterers entered into a charterparty on the
NYPE 1946 form in respect of the Captain Stefanos. It
undertook a voyage from South Africa to the
Continent/Mediterranean. Whilst en route to the discharge port, the
vessel transited the Suez Canal and, on or about 21 September 2008,
was hijacked by pirates off the coast of Somalia. The vessel was
released on or about 6 December 2008 after the owners paid a
substantial ransom. The charterers contended that the vessel was
off-hire for the period of the hijacking, i.e. between 21 September
2008 and 6 December 2008.

Off-hire

The London arbitration tribunal held that the vessel was
off-hire under a rider clause to the charterparty which provided as
follows at Clause 56:

"Should the vessel put back whilst on voyage by reason
of any accident or breakdown, or in the event of loss of time
either in port or at sea or deviation upon the course of the voyage
caused by ... capture/seizure, by detention or threatened detention
by any authority including arrest, the hire shall be suspended
..."

In view of the 2011 decision in TheSaldanha,
an Ince case reviewed in the July 2010 E-Brief, neither party
contended that the vessel could have been off-hire pursuant to the
unamended version of Clause 15 in the NYPE form. The charterers
successfully contended in the arbitration that the hijacking came
within Clause 56 as a "capture/seizure" of the
vessel. The owners argued during the appeal hearing that the vessel
was not off-hire during the period of the hijacking for the
following reasons:

The off-hire event of a "capture/seizure"
within Clause 56 was qualified by the words "by any
authority". By contrast, the charterers claimed that the
words "capture/seizure" stood alone and it was
only the words "detention or threateneddetention" which were qualified by the words
"by any authority".

The charterparty included the Conwartime Clause 2004 and
therefore, reading the charter as a whole, the risk of piracy was
placed upon the charterers and not upon the owners. Any off-hire
clause had to be read with this business purpose and allocation of
risk in mind.

The ship was not off-hire because the owners were complying
with the orders of pirates and this was deemed to be fulfilment of
the charter service by virtue of Conwartime 2004.

The construction of Clause
56

The judge, Mr Justice Cooke, held
that the starting point when construing Clause 56 of the
charterparty was to look for the ordinary and natural or
conventional meaning of the language used in the context of the
agreement, the parties' relationship and the relevant facts
surrounding the transaction so far as known to the parties.

Mr Justice Cooke concluded that the
wording used and the structure of the clause – including
its punctuation and grammar – all supported the
charterers' submissions. Each separate off-hire event within
Clause 56 was, by and large, separated by a comma. Therefore the
words "capture/seizure" were separated from the
words "detention orthreatened detention by any
authority". In reaching this decision, the judge made it
clear that the phrase "capture/seizure"
encompassed any act of forcible possession, including a hijacking
by pirates.

The owners had contended that Clause
56 had to be re-read by taking account of the overall allocation of
risk in the charterparty. They submitted that the effect of
incorporating the Conwartime clause was to allocate to the
charterers all risks of piracy. This "allocation of
risk" outweighed any reliance on the punctuation used in
Clause 56. Mr Justice Cooke was not persuaded by this argument
saying that it was Clause 56, in itself, which dealt with
allocation of risks between the parties where hire is
concerned.

Conwartime 2004

The owners submitted that Conwartime
2004 specifically deals with "War Risks", which
include "actual, threatened or reported" acts of
piracy. Sub-clause (f) of Conwartime 2004 entitles owners to comply
with the orders of "any other Government, bodyor
group whatsoever acting with the power to compel compliance with
their orders or directions". This phrasing, the owners
argued, included orders of pirates and therefore, under sub-clause
(h) of Conwartime 2004, compliance with orders of pirates was to be
deemed "due fulfilment of the charterparty". The
vessel could not be off-hire when the owners were deemed to have
fulfilled the service required of the vessel.

Mr Justice Cooke did not accept this
argument, holding that Conwartime 2004 does not deal explicitly
with off-hire periods. Conwartime 2004 relates to performance of
the charterparty and to breach of the charterparty, not to
off-hire. While Conwartime 2004 deals expressly with piracy
situations, it is not directed to off-hire situations. While the
judge did not have to decide the point, he doubted that sub-clause
(f) of Conwartime 2004 was apt to include orders from pirates.

Comment

In this case, the court read the off-hire clauses in the
charterparty in isolation. The 2011 decision of the Supreme Court
in Rainy Sky SA & others v. Kookmin Bank, an Ince case
reviewed in the January 2012 E-Brief, held that construction of a
contract is a "unitary exercise", i.e. it is
necessary to read the contract as a whole. The court said that this
approach was not appropriate when looking at an off-hire clause
– off-hire provisions frequently stand alone from the
rest of the charter. Mr Justice Cooke also did not accept arguments
as to the "commercial construction", adopting
instead a reasonably strict linguistic approach when construing the
clause.

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